1、Q|1JANUARY 2025 MARKET ANALYSISGita ThollessonSenior Strategic Business Advisor Anna-Fay Lohn Senior Strategic Business Advisor Debbie Smart Senior Product Marketer The State of Commercial BankingQ|2Key TakeawaysLiquidity has improved but has become more costly,squeezing net interest margins.Financi

2、al institutions(FIs)have emerged from the liquidity crisis with a solid foundation of deposits,approaching pre-crisis levels.The impressive deposit growth has come at a cost,with FIs paying incrementally more than Fed action,both in periods of tightening and easing.Meanwhile,the revenue side has not

3、 kept pace with rising funding costs,intensifying pressure on net interest margin(NIM).Fed rate cuts have reshaped the commercial loan pricing landscape.The 100 basis points in Fed rate cuts between September and December 2024 contributed to a shallowing of the inverted yield curve,with short-term r

4、ates declining while midterm rates spiked.This shift reflected changing market expectations,as FIs anticipated a slower pace of future rate cuts.In response,funding managers adjusted their curves strategically,pushing fixed-rate loan coupons upward even as floating rates continued to decline.There a

5、re pockets of credit stress in the commercial real estate sector.Credit performance has exceeded expectations across much of the market,with only a modest increase in delinquencies and a decline in commercial and industrial(C&I)downgrades.In the commercial real estate sector,credit ratings have rema

6、ined largely stable,although FIs have taken a more proactive approach to downgrading loans nearing maturity.010203040506The ever-increasing burden of fraud requires a united,proactive response.Fraud continues to rank high among the concerns of FI executives,especially when it comes to checks and ACH